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11. Capital Stock and Changes in Capital Accounts
The plan entitles the Company's employees, officers and directors to receive options to acquire the Company's common stock and is administered by the Compensation Committee of the Company's Board Directors or such other committee of the Board as may be designated by the Board to administer the Plan. Under the terms of the plan, the Company's Board of Directors is able to grant a) incentive stock options, b) non-qualified stock options, c) stock appreciation rights, d) dividend equivalent rights, e) restricted stock, f) unrestricted stock, g) restricted stock units, and h) performance shares. No options, stock appreciation rights or restricted stock units can be exercisable prior to the first anniversary or subsequent to the tenth anniversary of the date on which such award was granted. The plan will expire 10 years from its adoption by the Board of Directors. Under the 2011 Equity Incentive Plan, the Administrator may waive or modify the application of forfeiture of awards of restricted stock and performance shares in connection with cessation of service with the Company. The Company follows the provisions in ASC 718 "Compensation – Stock Compensation", for purposes of accounting for such share-based payments. All share-based compensation provided to employees is recognized in accordance with the relevant guidance, and is included in General and administrative expenses in the accompanying consolidated statements of operations. F-28
DIANA SHIPPING INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013 (Expressed in thousands of U.S. Dollars – except share, per share data and scrap rates, unless otherwise stated) Restricted stock during the years ended December 31, 2013, 2012 and 2011 is analysed as follows:
The fair value of the restricted shares has been determined with reference to the closing price of the Company's stock on the date the agreements were signed. The aggregate compensation cost is being recognized ratably in the consolidated statement of operations over the respective vesting periods. During 2013, 2012, and 2011, an amount of $8,203, $8,645, and $8,087, respectively, was recognized in General and administrative expenses presented in the accompanying consolidated statements of operations. For 2011, General and administrative expenses also include compensation cost of $7, relating to Diana Containerships for restricted shares issued to its executive officers. At December 31, 2013 and 2012, the total unrecognized cost relating to restricted share awards was $7,966 and $10,662, respectively. At December 31, 2013, the weighted-average period over which the total compensation cost related to non-vested awards not yet recognized is expected to be recognized is 0.81 years.
12. Voyage and Vessel Operating Expenses The amounts in the accompanying consolidated statements of operations are analyzed as follows: F-29
DIANA SHIPPING INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013 (Expressed in thousands of U.S. Dollars – except share, per share data and scrap rates, unless otherwise stated)
13. Interest and Finance Costs The amounts in the accompanying consolidated statements of operations are analyzed as follows:
14. Earnings / (Loss) per Share All shares issued (including the restricted shares issued under the Company's Incentive Plan) are the Company's common stock and have equal rights to vote and participate in dividends upon their vesting. The calculation of basic earnings / (loss) per share does not treat the non-vested shares (not considered participating securities) as outstanding until the time/service-based vesting restriction has lapsed. For the purpose of calculating diluted earnings per share the weighted average number of diluted shares outstanding includes the incremental shares assumed issued determined in accordance with the treasury stock method. For 2013 and on the basis that the Company incurred losses, the effect of any incremental shares would be anti-dilutive and therefore basic and diluted loss per share is the same. For 2012 and 2011, the denominator of the diluted earnings per share calculation includes 0 and 42,574 shares, being the number of incremental shares assumed issued under the treasury stock method weighted for the periods the non-vested shares were outstanding. F-30
DIANA SHIPPING INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013 (Expressed in thousands of U.S. Dollars – except share, per share data and scrap rates, unless otherwise stated)
15. Income Taxes Under the laws of the countries of the companies' incorporation and / or vessels' registration, the companies are not subject to tax on international shipping income; however, they are subject to registration and tonnage taxes, which are included in vessel operating expenses in the accompanying consolidated statements of operations (Note 12). Pursuant to the Internal Revenue Code of the United States (the "Code"), U.S. source income from the international operations of ships is generally exempt from U.S. tax if the company operating the ships meets both of the following requirements, (a) the Company is organized in a foreign country that grants an equivalent exception to corporations organized in the United States and (b) either (i) more than 50% of the value of the Company's stock is owned, directly or indirectly, by individuals who are "residents" of the Company's country of organization or of another foreign country that grants an "equivalent exemption" to corporations organized in the United States (50% Ownership Test) or (ii) the Company's stock is "primarily and regularly traded on an established securities market" in its country of organization, in another country that grants an "equivalent exemption" to United States corporations, or in the United States (Publicly-Traded Test). Notwithstanding the foregoing, the regulations provide, in pertinent part, that each class of the Company's stock will not be considered to be "regularly traded" on an established securities market for any taxable year in which 50% or more of the vote and value of the outstanding shares of such class are owned, actually or constructively under specified stock attribution rules, on more than half the days during the taxable year by persons who each own 5% or more of the value of such class of the Company's outstanding stock, ("5 Percent Override Rule"). The Company and each of its subsidiaries expects to qualify for this statutory tax exemption for the 2013, 2012 and 2011 taxable years, and the Company takes this position for United States federal income tax return reporting purposes. However, there are factual circumstances beyond the Company's control that could cause it to lose the benefit of this tax exemption in future years and thereby become subject to United States federal income tax on its United States source income such as if, for a particular taxable year, other shareholders with a five percent or greater interest in the Company's stock were, in combination with the Company's existing 5% shareholders, to own 50% or more of the Company's outstanding shares of its stock on more than half the days during the taxable year. F-31
DIANA SHIPPING INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013 (Expressed in thousands of U.S. Dollars – except share, per share data and scrap rates, unless otherwise stated) The Company estimates that since no more than the 50% of its shipping income would be treated as being United States source income, the effective tax rate is expected to be 2% and accordingly it anticipates that the impact on its results of operations will not be material. The Company believes that it satisfies the Publicly-Traded Test and all of its United States source shipping income is exempt from U.S. federal income tax. Based on its U.S. source Shipping Income for 2013, 2012 and 2011, the Company would be subject to U.S. federal income tax of approximately $238, $289 and $217, respectively, in the absence of an exemption under Section 883. 16. Financial Instruments The carrying values of temporary cash investments, accounts receivable and accounts payable approximate their fair value due to the short-term nature of these financial instruments. The fair values of long-term bank loans approximate the recorded values, due to their variable interest rates. The fair value of long-term loan receivable from Diana Containerships also approximates its recorded value, due to its variable interest rate. The Company is exposed to interest rate fluctuations associated with its variable rate borrowings and its objective is to manage the impact of such fluctuations on earnings and cash flows of its borrowings. In May 2009 (novated in March 2012), the Company entered into a five-year zero cost collar agreement with a floor at 1% and a cap at 7.8% of a notional amount of $100,000 to manage its exposure to interest rate changes related to its borrowings. The collar agreement is used as an economic hedge agreement and does not meet the criteria for hedge accounting; therefore, the changes in its fair value are recognized in earnings. As of December 31, 2013 and 2012, the fair value of the swap resulted to a liability of $378 and $994, respectively, both separately presented in the accompanying consolidated balance sheets. For 2013, 2012, and 2011, the Company incurred from the swap loss amounting to $118, $518, and $737, respectively, and is separately presented as Loss from derivative instruments in the accompanying consolidated statements of operations. The fair value of the collar agreement determined through Level 2 inputs of the fair value hierarchy as defined in ASC 820-10-35-47 Fair Value Measurements and Disclosure, Subsequent Re-measurement of FASB Accounting Standard Codification (ASC), is derived principally from or corroborated by observable market data. Inputs include interest rates, yield curves and other items that allow value to be determined. 17. Subsequent Events
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DIANA SHIPPING INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2013 (Expressed in thousands of U.S. Dollars – except share, per share data and scrap rates, unless otherwise stated)
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Exhibit 4.17 DATED 18 June 2013 TUVALU SHIPPING COMPANY INC. JABAT SHIPPING COMPANY INC. (as Borrowers) -and- DEUTSCHE BANK AKTIENGESELLSCHAFT FILIALE DEUTSCHLANDGESCHAFT (as Lender) UP TO US$18,000,000 SECURED LOAN AGREEMENT STEPHENSON HARWOOD CONTENTS
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